## Facts

- Ashford Laboratories, Inc. agreed to sell cold capsules (about $32,265) to Mabson Pharmaceuticals Ltd., a Nigerian importer.
- Mabson arranged for Savannah Bank of Nigeria, Ltd. to issue an irrevocable letter of credit in Ashford’s favor.
- The letter of credit required payment in U.S. dollars in New York upon presentation of specified documents and was subject to the UCP.
- Nigeria’s foreign-exchange controls required Savannah to obtain a foreign-exchange allocation from the Central Bank of Nigeria before it could remit U.S. dollars.
- After issuance, Nigeria implemented measures regulating payment of foreign trade debts and access to foreign exchange, including an administrative claim process.
- Ashford did not file the administrative claim Savannah asserted was required to obtain dollars for payment.
- Savannah did not pay under the letter of credit, contending it could not obtain U.S. dollars due to the Nigerian regime and the lack of a filed claim.
- Ashford assigned its rights under the letter of credit to Optopics Laboratories Corporation.

## Issues

1. Whether the act-of-state doctrine barred adjudication of a nonpayment claim on a letter of credit payable in New York when the bank attributed nonpayment to Nigerian foreign-exchange decrees.
2. Whether the issuing bank remained obligated to pay in U.S. dollars in New York despite later foreign-exchange restrictions and the beneficiary’s failure to pursue a Nigerian administrative process.
3. Whether reliance on foreign exchange regulations presented a nonjusticiable act-of-state question or a justiciable contract defense (e.g., impossibility or illegality).

## Decision

- The court denied Savannah’s motion for summary judgment and granted Optopics’ motion for summary judgment on liability.
- The act-of-state doctrine did not preclude the court from deciding the dispute because resolving liability did not require invalidating or condemning Nigerian sovereign acts.
- Savannah was held liable on its independent undertaking to pay under the letter of credit as specified (U.S. dollars in New York), with damages and interest to be determined.

## Legal Principles

- The act-of-state doctrine applies only when a court must pass on the validity or legal effect of a foreign sovereign’s public act within its territory; it is not triggered merely because foreign governmental measures form part of the background facts.
- A bank’s obligation under an irrevocable letter of credit is independent of the underlying sales contract and is enforced according to the credit’s terms upon compliant presentation.
- Foreign exchange controls and related administrative requirements, even if valid, are generally evaluated as potential contract defenses; they do not automatically excuse a bank’s promise to pay at a specified place in a specified currency.
- By issuing a credit payable in U.S. dollars in New York, the issuing bank ordinarily bears the risk that later foreign exchange restrictions may make funding or remittance more difficult or costly, absent express allocation of that risk to the beneficiary.
- Comity concerns do not bar enforcing a private commercial payment obligation in a U.S. forum when the judgment’s impact on a foreign state’s regulatory program is incidental.

## Conclusion

The court enforced the issuing bank’s New York-payable letter-of-credit obligation and held that Nigerian foreign-exchange decrees neither made the case nonjusticiable under the act-of-state doctrine nor, on the record presented, excused the bank’s failure to pay according to the credit’s terms.


Optopics Laboratories Corp. v. Savannah Bank of Nigeria, Ltd., 816 F. Supp. 898 (S.D.N.Y. 1993)